Take-Two's Zelnick: Digital Growth Won't Cannibalize Packaged Biz

Digitally-distributed games could account for as much as 40 percent of Take-Two's business three years from now, says chairman and CEO Strauss Zelnick, but he believes growth of new platforms and business models won't equate to a decline in existing ones. "Right now, digital distribution of our interactive entertainment represents something less than 15 percent of our revenue, and that's clearly growing," Zelnick tells Bloomberg Television's "Inside Track" program. "Packaged goods isn't going away for our business... because we have huge file sizes," he says. There are challenges for cloud computing, too: "It's pretty hard to interact with huge file sizes where latency issues are meaningful, if you're entirely in the cloud," he points out. But he also cites OnLive as one company he feels is "doing a phenomenal job of addressing that challenge", thus earning Take-Two's vote of support. The publisher's Mafia II was heavily involved in OnLive promotions as a key title on the service; OnLive users received early access to the game, and received a free OnLive game with their purchase. Like many publishers, Take-Two has also been exploring iOS, recently releasing a version of Grand Theft Auto: Chinatown Wars for iPad. But tablet computers thus far represent only a minor share of Take-Two's revenues, says Zelnick. "It's small for tablet, because we support largely consoles," he explains. "That's the bulk of our business... because it allows us to do incredibly robust products. However, what's exciting about the tablet revolution... is that tablets are going to become more and more robust platforms, and allow you to do incredible things. And they're portable, and they're cheap and they're getting cheaper." Zelnick cites Gartner data that predicts 20 million tablet devices will be sold this year, 60 million next year, and 200 million in 2014, platform growth he calls "pretty remarkable." Amid all this digital evolution, "I think you can see digital distribution to be 20, 30, 40 percent of our business" in three years, says Zelnick. "However, I believe our business is going to grow. So I don't think it actually takes a bite out of retail, and I doubt it takes a bite out of consoles." "I think it's a growth business; I think for interactive entertainment, everything grows, the wind is at our back," he adds. "While we're not exactly platform-agnostic... the fact that a middle-sized platform is going to grow is phenomenal news for us. The most important news for us is, how great is our next title."